Taxability as settled by Precedents / Circulars / Trade notices

Services of Storage and warehousing provided to Goods transport agency

No

Notification No 1/2009-ST, dated 05/01/2009

handling/storage and

warehousing of empty containers

Yes

Circular No. 60/9/2003-ST, dated 10-7-2003

Clock room service

No

Circular No F.No. B 11/1/2002-TRU, dated 01.08.2002

Terminal jandling charges

Yes

Circular No F.No. B 11/1/202-TRU, dated 01.08.2002

Value of Taxable Service

Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which services tax should be levied.

In respect of Storage and warehousing Services, no specific provision for determination of taxable value has been provided. However it has been clarified that the value of taxable services is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration are indicated separately in the invoice. Thus, the value of taxable Storage and warehousing Services is to be determined in terms of provision of Section 67 read with the prescribed Rules.

Abatement

No abatement has been granted to any person liable to pay service tax under the Section.

Exemptions available

General Exemption

Small Service Provider

Vide Notification No 33/2012-ST, dated 20.06.2012 – Exemption to Small service providers having taxable turnover of less than 10 Lakhs and providing services other than by way of under a brand name.

Import of Technology

Vide Notification No. 14/ 2012-ST, dated March 17, 2012 – Exemption in respect of Taxable service involving import of technology, from so much of service tax, as is equivalent to the extent of amount of R&D Cess payable on the said transfer of technology under the provisions of section 3 of the Research and Development Cess Act, 1986.

To Foreign Diplomatic missions and their personnel

Vide Notification No 27/2012-ST, dated 20.06.2012 – Exemption for all the taxable services provided by any person, for the official use of a foreign diplomatic mission or consular post in India, or for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein.

Services by TBI or STEP

Vide Notification No 32/2012-ST, dated 20.06.2012 – All taxable services provided by TBI or STEP have been exempted

Services provided to SEZ

Vide Notification No 40/2012-ST, dated 20.06.2012, all taxable services received by a Unit located in a Special Economic Zone (SEZ) or Developer of SEZ for the authorized operations, has been exempted from the levy of whole of the service tax.

Specific Exemptions:

Services of Storage and warehousing provided for Agricultural produce is in Negative List. For detail refer Para 8.6 of the Book.

Notification no. 25/2012 provides exemption to Services by way of loading, unloading, packing, storage or warehousing of rice and cotton

Same notification exempts Construction, erection, commissioning, or installation of specified original works relating to post- harvest storage infrastructure for agricultural produce including a cold storages for such purposes.

Provisions relating to point of Taxation

The point of taxation in case of Storage and Warehousing services will be governed by Rule 3 of the point of taxation rules, 2012. As per rule 3 of point of taxation rules, 2012, the point of taxation in case of restaurant service shall be:

Time when the invoice for the service provided or to be provided is issued. As per rule 4A of Service Tax Rules, invoice shall be issued within 30 days from the date of completion of service. In case invoice is not issued within 30 days from the completion of service, the point of taxation shall be date of completion of service.

In case where the person providing the service receives payment before the time specified above, the date of receipt of payment shall be the point of taxation.

If the period of providing the service is more than 3 months, it will be considered as continuous service as defined in rule 2(c) of Point of Taxation Rules, 2011. Accordingly, proviso to rule 3 of Point of Taxation Rules will apply for determining date of the completion of service.

Provisions relating to Place of Provision of Service Rules, 2012

The Place of Provision of Service Rules, 2012 contains different rules for different nature of services. Since the services of Storage is relatable to immovable property, thus the place of provision of services shall be guided by Rule 5 of Place of Provision Rules, 2012. If the immovable property is located in taxable territory services are taxable, else non taxable.

Provisions relating to reverse charge

The present services are not included under the mechanism of Reverse Charge. Thus, the person liable to pay service tax shall be the restaurant itself.

The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002.

As per clause (87), “storage and warehousing” includes storage and warehousing services for goods including liquids and gases but does not include any service provided for storage of agricultural produce or any service provided by a cold storage. As per sub-clause (zza) of clause (90), the taxable service is any service provided, to any person, by a storage or warehouse keeper in relation to storage and warehousing of goods.

Storage and warehousing service for all kind of goods are provided by public warehouses, private warehouses, by agencies such as the Central Warehousing Corporation, Airport Authorities, Railways, Inland Container Depots, Container Freight Stations, storage godown and tankers operated by private individuals etc. The storage and warehousing service provider normally make arrangement for space to keep the goods, loading, unloading and stacking of goods in the storage area, keeps inventory of goods, makes security arrangements and provide insurance cover etc. Service provided in ports has already been covered under the category of port service.

Service provided in relation to agriculture produce and service provided by cold storage is outside the ambit of the levy. Doubts have been raised about the scope of term “agricultural produce”. In order to clarify the scope of this term beyond doubts, an order has been issued under the power vested under section 95 of the Finance Act (see Order No. 1/2002-ST, dated 1-8-2002). As clarified in the order, the term agricultural produce would cover all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugarcane, jaggery, raw vegetable fibres such as cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, and similar products. However, manufactured products such as sugar, edible oils, processed food etc. will not come under the purview of the term ‘agricultural produce’.

It has been stated that in some case a storage owner only rents the storage premises. He does not provide any service such as loading/unloading, stacking, security etc. A point has been raised as to whether service tax would be leviable in such cases. It is clarified that mere renting of space cannot be said to be in the nature of service provided for storage or warehousing of goods. Essential test is whether the storage keeper provides for security of goods, stacking, loading/unloading of goods in the storage area.

A point has been raised by the Airport Authority of India (AAI) that they have established cold storage for perishable goods at cargo complexes at various places as part of cargo warehousing activities and whether the exemption provided in respect of cold storage would be applicable to these cold storages also. It is clarified that service provided by a cold storage has been specifically excluded from the tax net. Therefore, the service of cold storage provided by AAI will also be exempt.

Another point raised is that AAI are collecting terminal charges which is only a facilitation charge for providing a terminal and as such does not involve any service. As per the Notification No.Cargo/13519/Pt.I, dated 4-6-1993of the International Airport Authority of India “terminal charges”, means charges payable to or collected by the Authority or Cargo Handling Agency for use of facilities for processing of cargo. As per this Notification “storage and processing charges” specifically include terminal charges also. Therefore, service tax is leviable on such charges.

A doubt has been raised whether cloak room services for passenger’s luggage in railway stations, bus stations etc. would come within the purview of storage and warehousing services. It is clarified that these are passenger terminal services incidental to rail transport or road transport, they do not come within the purview of storage and warehousing services.

9. The Central Warehousing Corporation has stated that they have more than 450 warehouses which are controlled by 17 regional offices. The billing is done both at the warehouse level and at the Regional Office level. However accounting for the warehousing charges as well as the cargo handling services is done only at the Regional Office level. Therefore, they have requested that only their Regional Offices should be registered for service tax purposes. The Service Tax Rules empower the Commissioner of Central Excise to register only those offices which have centralised accounting facility. The Commissioners may exercise this power in such cases and register only the regional offices of CWC.

Another point made by the CWC is that they engage handling and transport contractors (H&Tcontractors) to provide handling and transport services who would be charging them service tax for cargo handling services. CWC add supervision charges and raises the bill to the customers. For warehousing they raise a separate bill. The question is whether CWC is liable to pay service tax on cargo handling services and if so, whether they can take credit of the tax paid on cargo handling services by the H&T contractor. Similar situations may exist in respect of other storage and warehouse keepers. It is clarified that if the storage and warehouse keeper undertakes cargo handling services also and raises its own bill to the customer for such service, then he would be liable to pay service tax under the category of cargo handling services also. However, he would-be eligible to take credit of service tax paid on cargo handling services rendered by the H&Tcontractors and adjust the same against his service tax liability on cargo handling services provided he raises a separate bill for the same to his client. In other words, he cannot adjust the credit against storage and warehousing service charges.

Circular 60/9/2003-ST, dated 10-7-2003

I am directed to say that a doubt has been raised regarding levy of service tax on storage of empty containers. The matter has been examined. It is clarified that the handling/storage and warehousing of empty containers would be covered within the scope of storage and warehousingservices, as it is covered under the heading goods under section 65(87) of the Finance Act, 1994.

The Service Tax would be leviable on it. Further, the clarification issued vide letter No.F.B.II/I/2002/TRU, dated 1-8-2002 regarding empty containers not to be considered as Cargo for Cargo Handling Services, has no relevance in the instant case.